Amazon, Challenging Apple Head-On, Makes Move Into Cloud-Based Music Service

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[Updated at 1:40 p.m. with more pricing info, see below] Apple’s iTunes has become the default music store, playback platform and digital locker for millions of consumers. But the market-owner certainly has limits—chief among them are terrestrial storage and a limited number of machines authorized to use a given account.

Seattle’s Amazon.com (NASDAQ: AMZN) is moving heavily into this space today with the unveiling of its Cloud Drive and Cloud Player, a pair of services that aim to take an iTunes-like experience into the always-there computing ether. And if the target on Apple (NASDAQ: AAPL) wasn’t obvious enough, Amazon’s new player also works with chief mobile platform rival Android.

This space has been begging for some innovative cloud-storage options that could go mainstream, and Amazon’s has a decent chance. Integration is the key: iTunes’ dominance has shown that lots of people prefer having all of their digital music arranged in a single place, without having to bridge between buying, storing, and enjoying. Amazon’s Cloud Drive and Player may be able to deliver that same kind of experience, with the additional feature of not having to clog up your hard drive or connect external storage every time you want to play a song.

But the real point here isn’t so much the player and cloud storage as it is Amazon’s MP3 store. The Cloud Drive starts with 5 GB of free storage, and offers a free upgrade to 20 GB if a customer buys an album on Amazon’s digital music marketplace. There are larger storage options, priced at $1 per gigabyte per year, in big chunks up to 1,000 GB. The web-based Player is free, and the Android Cloud Player also is bundled with the Amazon MP3 app, which includes the store. [Added the per-GB pricing info to this paragraph.]

So the free versions are simply loss-leaders to get people in the door of the Amazon MP3 store—somewhat similar to the video-streaming option that Amazon recently tacked onto its Prime premium shipping service. That’s a canny bet, and it’ll be interesting to see how many people make the switch. One thing we’ve learned about Apple is that it tends to go all-in fast enough that it defines a market, and millions of people wind up not even caring about the alternatives.